- Six state-owned commercial banks in China cut deposit rates on Thursday, according to a CNBC check.
- Analysts at Nomura said the rate cuts would help improve banks’ profitability while paving the way for the People’s Bank of China to cut other rates.
- China’s economic recovery from the pandemic has slowed in recent months.
Bank of China is one of China’s leading state-owned banks. Pictured is the Shanghai branch on March 27, 2023.
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BEIJING—China’s biggest banks on Thursday cut interest rates for savers in a bid to spur growth in an economy where consumption has lagged.
The websites of China’s six state-owned commercial banks all said they had lowered their updated yuan demand deposit rates to 0.2% from 0.25% last year, according to a CNBC check. demand deposit Allow withdrawals at any time.
Banks have also cut interest rates on other deposit products, including cutting the five-year term deposit rate from 2.65% to 2.5%, according to their websites.state-run Securities Times reported The Thursday edition of the newspaper reported on the reduction in deposit interest rates.
Analysts at Nomura said the rate cuts would help improve banks’ profitability and pave the way for the People’s Bank of China to cut other rates.
“The reduction in bank deposit rates sends a strong signal that the PBOC is paving the way for lowering the benchmark lending rate (MLF) to lower the LPR,” Nomura chief China economist Ting Lu and team said in a report. I think it’s something,” he said. .
Intermediate lending facility rates are expected to be announced on June 15th, while loan prime rates are expected to be announced on June 20th.
A more important issue is lowering the unemployment rate. Households with strong confidence in their jobs will spend more.
Chief Economist, Pinpoint Asset Management
Analysts said, “Given this new deposit rate cut, the rapid deterioration in exports, the escalating real estate crisis, the ongoing disinflation, and the possibility of a Fed moratorium, our reluctance to respond to this request for a rate cut is unimaginable.” Confidence increases,” he said, noting that he had been calling for a rate cut. Since mid-May, the MLF and LPR rates have been cut by 10 basis points.
The central bank has not changed the two rates for nine months. As of May, the one-year MLF was at 2.75%, the one-year LPR at 3.65% and the five-year LPR at 4.3%.
China maintains low interest rates, in contrast to the US and other major economies aggressively raising interest rates to curb inflation.
When interest rates fall, businesses are more motivated to borrow. A lower deposit rate would make it more expensive for people to keep their money in the bank, theoretically increasing their willingness to spend.
In the first quarter, 58% of household savers said they preferred saving over spending and investing, according to a People’s Bank of China (PBOC) survey. It was the lowest level in a year.
However, it is not clear whether lower deposit rates will immediately lead to higher spending.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in an email that the cuts were “marginally positive, but unlikely to significantly boost household spending.”
“The more important issue is to bring down the unemployment rate. Households with strong confidence in their jobs will spend more,” he said.
Youth unemployment hit a record high of over 20% in April. China is due to release May retail sales and unemployment data on June 15.